Chuck Schumer’s Wall Street dilemma

Schumer has declined to say anything about his thinking on the chairmanship. | AP Photo

Brown has also used his subcommittee chairmanship to press his case that big banks shouldn’t play a large role in commodity markets for such things as metals and energy, arguing it leads to higher costs for consumers. This has put pressure on regulators who in turn have put pressure on banks.

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Brown’s efforts have won him the strong support of consumer groups and Wall Street critics, who are also quick to push back on any idea he’s on a witch hunt against the broader financial industry.

For instance, Brown has taken the lead on a top priority for the insurance industry — getting its new regulator the Federal Reserve to write funding rules tailored to its business model rather than based on how the central bank treats banks.

Most senators would jump at the chance to have direct oversight of their hometown industry, but Schumer is not like most senators.

The New York Democrat, who currently holds the No. 3 position in his party’s leadership, is widely seen as the successor to Senate Majority Leader Harry Reid — and he would be running a caucus that has grown increasingly hostile toward Wall Street.

But Senate insiders say that if Schumer were to take the chairman post and carry the water for his allies on Wall Street, his standing would slip with the vocal liberal wing of his caucus — giving a leg up to either Senate Majority Whip Dick Durbin or Washington Sen. Patty Murray, the fourth-highest-ranking Democrat — in the jockeying to replace Reid. And that would undermine all the work Schumer has done in the past several years building his power and strengthening his relationships within his caucus — while dealing delicately with Wall Street and using it as a major source of campaign cash.

Schumer has voted against Wall Street priorities. Though he wasn’t a vocal supporter of Dodd-Frank, Schumer ultimately voted for the law, a position that drew the ire of then-Mayor Michael Bloomberg and the financial community. He also has backed higher taxes for private equity executives. Democrats, including Schumer, have made raising taxes on millionaires and touting income inequality a favorite campaign weapon.

But Schumer has also shown support for many of his Wall Street allies. He’s been critical of the sharp-edged rhetoric lobbed by the White House and his Democratic colleagues against bankers, and he’s recently pushed for a delay in Commodity Futures Trading Commission swap trading rules.

The difference between Schumer and his more progressive colleagues was on display at a recent hearing with nominees for the Fed board.

Sen. Elizabeth Warren (D-Mass.) said she was worried about the nomination of Stanley Fischer to become Fed vice chair because of his three-year stint as a senior executive with Citigroup, the onetime workplace for several top administration economic officials.

“The connection between Citigroup and Democratic administrations really sticks out — I think it’s dangerous if our government falls under the grip of a tight-knit group connected to one institution,” she said.

But Schumer was quick to come to Fischer’s defense, saying “three years at Citibank, I think, should be an asset rather than a liability.”

This middle-ground approach has endeared him to some on Wall Street, even though others want their New York senator to be a more aggressive defender of the industry. But if he became chairman of the panel, it would be much harder for Schumer to engage in this balancing act.

“Most importantly he doesn’t want to have to be chairman because he knows Wall Street will come to him to protect them,” said one Senate source who knows Schumer well. “That puts him in a bad spot.”

As Democratic leader Schumer would be in position to have great influence on issues impacting Wall Street, as well as almost anything else he chose, but he could pick his spots more easily than if he was at the committee’s helm.

In some ways, Schumer is boxed in for the immediate future largely because Reid has no plans to go anywhere and the Senate Democratic Caucus still is supportive of the Nevada Democrat. In a recent interview, Reid made clear he plans to stay as Democratic leader — no matter the outcome of this fall’s elections — and will also seek reelection in 2016.

“Sure,” Reid said when asked if he would remain leader next Congress, “as long as my caucus wants me.”

For Schumer the question is to wait on Reid or move on and take the Banking gavel. Many on Wall Street are betting on wait.

“Why would he do it?” said a senior Wall Street executive who has deep connections in Washington. “Right now he can make promises to us without ever having to actually deliver anything. He is in the perfect spot.”